How Finance and Procurement Can Accelerate Business Growth

Accelerate for Business Growth: Are Finance and Procurement the New Power Couple?

PARADIGM SHIFT IN E-SOURCING, Procurement
Blogs, Rules, 2. Reevaluate Sourcing

Overview

In our New Rules of Procurement Engagement series we are engaging with leading thought leaders and practitioners, from global powerhouses to tech wizards, to gain insight into the changing landscape taking place in finance and procurement.

In the latest eBook: Reevaluate Sourcing, we asked the changemakers to give their perspective on the (sometimes fraught) relationship between Finance and Procurement and whether they have potential to be the new ‘power couple’ in combating supply chain risks and accelerating business growth. Here is what they told us.


RECOGNITION IS THE SPARK

Organisations committed to a common goal, to improving performance, to accelerating growth no matter the circumstances, know the power of collaboration.

Collaboration doesn’t just affect the bottom line, when employees from a diverse set of backgrounds and skills work on a task together it fosters greater creativity, innovation and problem-solving.

Procurement and Finance have somewhat of an interesting history. Just as there’s sometimes a disconnect with Sales and Marketing, Finance and Procurement have, at best, not always worked closely together, or at worse, have been at loggerheads.

“It’s true that there’s not a natural link between Finance and Procurement which is strange in a way because both are trying to improve the performance of the company, trying to improve the profitability of the company they work for. But the reality is the collaboration is weak.” Emmanuel Olivier, Esker

However, a positive of the recent tumultuous times is that these two departments are beginning to recognise that together they can achieve more.

“What the pandemic did was it made people aware of how deeply embedded supply chains are in our daily lives… and what’s coming down are the silos between Finance, Procurement, IT, Marketing. We’re now dealing in a world where pieces no longer are islands unto themselves but have to cohesively work together and I think that’s really where we’re seeing the bridges happening between Finance and Procurement.” Jon Hansen, Procurement Insights

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COLLABORATION IS THE FLAME

Gartner’s 2022 Annual CFO Survey found that profitable growth, inflation and balance sheet health were ranked as top concerns in the majority of responses.

Top Concerns of CFOs and Board Statistics

In comparing this to Ardent Partner’s statistics on the “Top Challenges Facing CPOs” there is a lot of synergy between the two departments.

Top Challenges Facing CPOs Statistics

In addition, McKinsey & Company’s biennial CFO survey found a significant increase in the number of procurement employees who now report to CFOs over the last few years.

These statistics support the trend in procurement for the need to break down silos and work with finance to become the ‘power couple’ in combating supply chain risks and accelerating business growth.

“Yes, we had friction but I think when you apply it right, friction means that people are dedicated and committed. And friction often is what helps push us all forward and make new realisations. I don’t see it as a problem when there are discussions and friction. I see it as a good thing. Overall, I think we all know that we (Procurement and Finance) need each other and that we have a mutual interest in making it work.” Jacob Gorm Larsen, Moneyball CPH

THE ‘POWER COUPLE’

From a strategic standpoint, it’s up to senior management to take the reins and ensure Finance and Procurement are working together towards a common goal with all the nuances and complexities that the current economic climate presents.

So, exactly where do the Finance and Procurement goals converge?

The short answer is profitable growth, cost optimisation and the bottom line. See diagram below for more detail.

Shared Challenges Facing CFOs and CPOs

“Now the situation is different, yes we’re trying to improve the performance of the profitability of the company but is it short-term? How about the potential risk that we’re facing? How do you address them? Did you choose this supplier just because you get a lower price but how much additional risk have you created by doing so? All of these questions arise now and they may not have been as important in the past as it is today.” Emmanuel Olivier, Esker

ALIGNING FOR GROWTH

To expedite this synergy, it’s imperative to have integrated systems that connect the data and insights in order to better identify performance, risk and opportunity.

FIVE KEY BENEFITS OF INTEGRATED FINANCE & PROCUREMENT SYSTEMS

1. Streamlined processes automate finance and procurement activities, reducing manual effort, mitigating errors, and improving overall efficiency

2. Enhanced supplier management facilitates better management from initial supplier evaluation and onboarding, to performance tracking and collaboration, e.g. centralised supplier databases, automated supplier qualification processes, and real-time supplier performance monitoring

3. Better spend insights enables Finance and Procurement to gain a comprehensive view of spend data/insights to tackle inflation and increase savings, e.g. advanced analytics and reporting capabilities that support data-driven decision-making, cost optimisation, and identification of savings opportunities

4. Compliance and risk management to ensure compliance with internal policies and regulatory requirements, e.g. automated ESG and compliance checks, risk assessment tools, and audit trails to ensure governance and mitigate risks

5. Enhanced collaboration and communication on a day-to-day basis, e.g. centralised data, automated notifications, shared document repositories

“Our (Market Dojo and Esker’s) strategy is to provide a S2P (Source-to-Pay) ecosystem where you have the P2P (Procure-to-Pay) system, and the best of breed sourcing system, to form this wonderful S2P ecosystem, which doesn’t lose its focus on the individual departments.” Alun Rafique, Market Dojo

AI POWERED SOURCING

In talking about integrated systems, it’s important to consider the impact AI will have on sourcing, specifically to streamline workflows, eliminate manual tasks, and drive efficiency.

Here are examples of how AI can help procurement and finance professionals

  • Streamlined and optimised RFx management from request creation to bid evaluation and negotiation, resulting in accelerated timelines, improved accuracy and transparency, and reduced administrative burden
  • Enhanced integration of sourcing process to ensure compliance, reduce risks, and optimise supplier relationships
  • AI generated Customer Support chat to provide quick and efficient responses to customer inquiries, improving response times and enhancing overall customer satisfaction
  • Assisted learning to provide intuitive tools with automated user prompts and templates supporting each stage of the sourcing workflow
  • Advanced analytics and decision support to improve data-driven decision-making, predictive insights, and continuous improvement of sourcing strategies

“When it comes to strategy, especially in the identification of opportunities, e.g. looking at spend data combined with other sources, such as market data and contractual data, and using AI to see patterns and spot opportunities – I think this is extremely exciting. Also in the recommendation of different sourcing strategies, recommending the right approach to a certain geography.” Jacob Gorm Larsen, Moneyball CPH

“Artificial intelligence can enable procurement and finance executives to make better decisions, much wiser decisions, for their businesses.” Emmanuel Olivier, Esker

“The appetite (for AI) is there from a very simple perspective of competitive advantage. If you can move faster than your competition then that allows you to get ahead of the competition.” Alun Rafique, Market Dojo

“I think the best is still to come when we talk about AI and strategic sourcing… and why it’s extremely exciting to work in this field.” Jacob Gorm Larsen, Moneyball CPH

Learn more about how AI generative questionnaire creation enhances Market Dojo’s Sourcing solution.

 

To join the New Rules conversation, download a copy of the full Reevaluate Sourcing eBook, or visit the New Rules Hub.

new rules of procurement engagement

November 9, 2023
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